Tuesday, March 12, 2013

DANG! Red Cross Only Spends What?!

I was, literally, floored by what I found.

To put together my fundraising presentation for our sustainable home project in Haiti and here, I wanted to compare data with the industry standard. So, I looked up American Red Cross's IRS filings; their Form 990. All charities are required to file these annually.

It also reports that Administrative Expenses accounts for only 4% of their expenses. It says that Program Expenses are 92.2% of their expenses.

Now, this sounds great...on Charity Navigator. How on earth they sort these expenses like this, I am not sure. This boggles me when I read the Form 990 line by line.

How Does This Look At Our Scale

To compare, our organization promotes that that we can build sustainable homes for approximately $5,500. As a good business principle, I need to make sure that the client receives what they expect or better (under-promise, over-deliver.) That is the price it would take to complete that building.

A donor client would expect that $5,500 would go to build that house. If they found out that only $2,090 made it to the field, the building was not complete, and that I will need more donations to complete that building, they would be pretty upset. That is just not good public relations.

I am not opposed to paying salaries. Someone has to get paid. Someone has to administer medical care (Red Cross) or pound a tire (PhilanTropics Foundation.) But tell the whole story.

In our case, we can complete a sustainable home for $5,500, a sustainable community for about $44,000. This would include the labor for the build itself. To continue to maintain the administration, however, we would need at least another $36,000 a year.

What it takes to manage an entity that large, I can only guess. Yet, I appeal, treat that donor client responsibly. The nonprofit sector is in dire need of building trust agents.

If that donor client knew that 60% of their donations went to salaries, would they want to continue to partner with that organization?

Finally, would YOU include the Administration Expense/Salaries in the per unit production cost?